World Bank Faults Tanzania Tax System

Tanzania has climbed up ease of doing business rankings, but the country is still lagging behind regional peers because of a complicated tax payment system, a new report shows.

According to the Doing Business 2017 Report released yesterday, East Africa’s second biggest economy adopted just one reform to improve aimed at improving the business environment. Tanzania is ranked 132nd, seven places up from its 139th position in last year’s report.

While the country has been credited for extending coverage of the credit reference bureau, the report notes that the government undermined this positive attribute by complicating the tax payment system.

Kenya and Rwanda undertook five and four reforms, respectively, to continue cementing their positions as East Africa’s most reformed economies during the period under review.

Uganda adopted three reforms, while Burundi made one improvement. No reform was reported in South Sudan, the newest member of the East African Community.

Regionally, Tanzania is ahead of Burundi and South Sudan, according to the latest rankings.

Doing business rankings are based on the average of how close each economy is to global best practices in business regulation.

A high score indicates a more efficient business environment and stronger legal institutions.

The report says that sub-Saharan Africa economies stepped up the pace of reform activity, with 37 economies undertaking a total of 80 business reforms in the past year, an increase of 14 per cent from the previous year.

For the second consecutive year, Kenya was among the world’s top 10 reformers, while seven economies implemented four or more reforms each.

The world’s other top 10 reformers, based on reforms undertaken, are Brunei Darussalam, Kazakhstan, Kenya, Belarus, Indonesia, Serbia, Georgia, Pakistan, United Arab Emirates (UAE) and Bahrain. However, 13 economies in the region had additional hurdles for women entrepreneurs.

Economic experts and private sector players see Tanzania as having a long way to go as far as a conducive investment climate is concerned.

Prof Honest Ngowi of the Mzumbe University Business School said the rankings mattered a lot for investment decisions and a low ranking could scare away potential investors who would prefer countries where they could operate smoothly.

“It’s good news that Tanzania has climbed up the rankings, but we still have a lot to do with regard to taxation, corruption and even infrastructure,” said Prof Ngowi.

The Tanzania Private Sector Foundation (TPSF) unveiled a report last week indicating that the local business environment was still not good.

The sixth Business Leaders Perceptions of the Investment Climate in Tanzania Report – 2015 mentions corruption as the biggest impediment to business growth that has been least addressed by the government. Other issues include tax administration, level of taxes and access to finance.

However, the private sector is banking on President John Magufuli following his crackdown aimed at restoring discipline and accountability in public service.

TPSF Executive Director Godfrey Simbeye said yesterday during the report’s launch that he was not entirely surprised by the findings, but voiced optimism that shortcomings highlighted would be addressed and improvement would be seen in the next report.

“There are no miracles in this, and we expect more improvement. We have confidence in initiatives being taken by the new government’s leadership,” he said.

The government said it would continue addressing issues which were adversely affecting the business environment.

“It’s a great achievement having improved in the rankings,” said Mr Chrispher Mramba, assistant director in the Prime Minister’s Office responsible for improving the business environment.

“We will continue improving property and business registration and other issues that affect the local investment climate,” he added.